By Joe O’Neill – I’ve had the privilege of working with outstanding entrepreneurs in a broad range of industries. They are good at many things, including controlling expenses. With limited access to capital, saving a penny here and a penny there goes right to the bottom line. They also tend to be decisive risk takers who move quickly on opportunities or challenges. However, introduce the topic of succession planning and many suffer from procrastination and that can be an expensive mistake. During my days in commercial banking this stance represented a significant risk to the bank. As a business coach, it has become a critical focus with my clients.
Why is this phenomenon so prevalent?
Ego & Procrastination
The founder cannot accept that others, family or outsiders, could possibly manage the business with as much skill and acumen. Often that is true, particularly if there hasn’t been sufficient effort to develop leaders within the company. It’s nice to be indispensable but at what cost?
Private businesses are most often valued on a multiple of EBITDA (Earnings Before Interest Taxes Depreciation and Amortization). Owners may not realize the value they have created over the history of the company and may be oblivious to the real cost of procrastination.
No Identified Successor(s)
Founders may be unable to decide the best course of action because they are trying to meet the needs of many stakeholders – employees, partners, customers, suppliers. One of the best ways to navigate this is to identify successors early, help them develop their skills, and work with them on a plan that responds to the needs of all stakeholders.
Procrastination from Fear of Change
Few people enjoy change. What will their post-succession role be? How will it impact daily life? Relationships? Business acquaintances? Friends? Health? Change is inevitable. No one is immortal. The key is accepting the inevitable and managing it effectively.
The Math Doesn’t Work
Often, if there has not been an emphasis on building value over time, the value generated on the sale may be far below expectations. The best way to avoid this is to understand and focus on what creates value, invest the time and resources into maximizing that value, and always be in the best position to realize it.
Don’t be a procrastinator. The best time to plant a tree was 20 years ago: the second best time is now.
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